Use the information below to answer the question that follows.
When commodity X sold for N25 per unit, 50 units of commodity Y were purchased. With an increase in the price of commodity X to N50 per unit, the demand for commodity Y fell to 20 units.
Determined the cross elasticity of demand?
1.7
0.6
-0.6
-1.7
Explanation
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Discussions (26)
Myschool.ng.
please the correct answer is 0.6 (option B) using the formula of cross elasticity of demand.
%change in quantity of commodity Y ÷ %change in price of commodity X
The question is wrongly composed:
The changes in price was not given.
REF: No need, check the question again
the correct answer is C -0.50
cross elasticity is
percentage change in qty of X
___________________________________
percentage in price of Y
ie change in qty = 20 - 50 100
_______ x _______
50 1
-30 100
_______ x ______ -60%
50 1
change in price = 50 - 25 100
_________ x ______
25 1
= 25 100
_________ x ________ = 100%
25 1
therefore: -60% -60 100
_________ or ________ x _______ = - 0.60
100% 100 1
Note: in cross elasticity we dont ignore the sign because it is going to be used to determine the type of related goods it is i.e either Complementary or Substitute which are usually the commodities considered in cross elasticity.
the cross elasticity of a complementary good is negative while that of the substitute good is positive. so the answer we have here determines the correct answer to the next question which is option D.
Not well constructed, the increase in the price of the product was not given. Do well to check the question again
*Cross elasticity = %∆ demand of x/%∆ in price of y*
*Or*
*Cross elasticity= %∆ demand of y/%∆ price of x*
*%∆demand of y = 50 - 25/25 ×100*
*= 25/25 ×100*
*= 100*
*%∆ price of x = 20 - 50/50 ×100*
*= -30/50 ×100*
*= -60*
*Cross elasticity = %∆ demand of y/%∆ price of x*
*= -60/100*
*= -0.6*
*Option C 
*
The right answer is c. %∆ in qty of x ÷%∆ in price of y.
%∆ in x = 50-25÷25×100 = 100
%∆ in y = 20-50÷50×100 = -60
cross elasticity= -60÷100 = -0.6
the correct answer is C -0.06
cross elasticity is
percentage change in qty of X
___________________________________
percentage in price of Y
ie change in qty = 20 - 50 100
_______ x _______
50 1
-30 100
_______ x ______ -60%
50 1
change in price = 50 - 25 100
_________ x ______
25 1
= 25 100
_________ x ________ = 100%
25 1
therefore: -60% -60 100
_________ or ________ x _______ = - 0.60
100% 100 1
Note: in cross elasticity we dont ignore the sign because it is going to be used to determine the type of related goods it is i.e either Complementary or Substitute which are usually the commodities considered in cross elasticity.
the cross elasticity of a complementary good is negative while that of the substitute good is positive. so the answer we have here determines the correct answer to the next question which is option D.
Using the initial formula %change in qty demanded÷%change in price, the answer is B
